Welcome back to the FT’s live coverage of the eurozone crisis. Run by John Aglionby, Tom Burgis and Orla Ryan on the news desk in London, with contributions from correspondents around the world. All times are GMT.
20.00: So, Berlusconi has offered to resign – but only after parliament passes an austerity package. And then, he tells Italian television, he wants elections. We’re wrapping up the live blog now: see the new stories and analysis on FT.com for developments from Rome and elsewhere through the night.
19.46: In Rome Ferdinando Casini, head of the opposition party UDC, has told reporters he is “convinced that Berlusconi understands that the current economic and political situation does not allow for a long and extenuated election campaign“.
19.40: From Milan, the FT’s Rachel Sanderson reports that after meeting the president Berlusconi returned to his residence in Rome, Palazzo Grazioli, where he has been joined by Angelino Alfano, the young Neapolitan member of his party whom Berlusconi suggested earlier this year could be his successor. Berlusconi has also been joined by Niccolo’ Ghedini, his lawyer, and members of his coalition party the Northern League, according to Italian reporters at the scene.
Rachel, our Italian business guru, adds:
Shares in Mediaset, Berlusconi’s media group listed on the Milan stock exchange, fell 3 per cent on Tuesday against a 1 per cent rise among Milan’s blue chip stocks. The stock tends to lose value when Berlusconi is politically weak on sentiment that having its majority owner in political office favours the broadcaster.
The news of Berlusconi’s plan to resign came after the market close but mediaset shares have underperformed the Milan index for a week, and are down 8 per cent over the past 7 days.
19.39: Berlusconi is quoted by the Ansa news agency as saying that he “sees elections as the only option”
19.33: Still in Rome, the FT’s Guy Dinmore clarifies where we stand:
Giorgio Napolitano, head of state, said Silvio Berlusconi had given his commitment to resign as prime minister once the government had passed the economic reform package agreed with his European partners.
In a statement after about one hour of talks, Mr Napolitano said Mr Berlusconi had expressed his recognition of the “urgent need” to respond quickly to the expectations of Europe through the approval of the stability law that would be amended in light of the most recent recommendations of the European Commission.
The president said that once the legislation had been passed then the prime minister would submit his resignation. Mr Napolitano would then hold consultations with leaders of political parties over the next steps to be taken.
This left open the possibility of Italy heading to elections early next year or possibly the formation of an alternative government.
19.28: The markets are digesting to news from Rome. Chris Adams, the FT’s markets editor, reports:
The euro jumped from $1.378 to $1.384, a session high, on news of Silvio Berlusconi’s resignation but has since pared some of those gains. Wall Street stocks ticked higher, as did crude, and gold slipped back through $1,800 an ounce. Italian bond yields ended the day’s trading at 6.77 per cent and, if recent activity is any guide, can be expected to fall tomorrow. In short, investors like it.
19.03: And when will this law be passed? The FT’s Guy Dinmore says it could take some weeks but maybe quicker if the opposition co-operates (as it did with the emergency austerity package).
18.59: A senior official tells the Financial Times that Berlusconi is proposing to resign after parliament passes the new financial stability law containing the reform measures agreed with the EU.
18.57: The euro jumps, gold falls and stocks rise on reports of Berlusconi’s resignation.
18.56: BREAKING NEWS Reports saying that the Italian president has said Berlusconi is going to resign. More details to follow…
18.48: Berlusconi has left the presidential palace. The meeting lasted an hour. No word yet on what was said.
18.29: More intrigue over exactly what Berlusconi jotted down as the Italian parliament voted (see 17.36). The FT’s Guy Dinmore in Rome clarifies.
It is very hard to decipher. He might be saying “I resign” but in fact some are reading it as “you resign” in that he was taking notes of what the opposition leader was urging him to do.
18.18: Here’s an evening update of the day’s developments:
- Silvio Berlusconi lost his majority as Italy’s parliament approved last year’s accounts, heaping pressure on the PM to go. He headed off to see the president, though there was no clarity on whether he will indeed resign
- Italian bonds have had another hammering, with yields setting fresh euro-era records, at one point reaching 6.77 per cent. The spread over German Bunds – a key measure of how sustainable Italy’s debt is – widened too
- Negotiations over the formation of a new Greek government have dragged on but the president is poised to appoint a new coalition government led by Lucas Papademos, a former vice president of the European Central Bank who previously served as Greece’s own central bank governor
- At the meeting of European finance ministers in Brussels, the UK’s George Osborne launched a scathing attack on his colleagues’ proposals for a tax on financial transactions
18.02: From bunga bunga to bullion – investors left jittery by the outlook for the euro are pushing up the gold price.
17.39: Spanish finance minister Elena Salgado said there’s no need to organise an additional finance ministers meeting on Greece as there’s already a meeting scheduled before the end of November, Bloomberg reports. Ministers are due to meet on Nov 29 to Nov 30.
17.36: And the photographic evidence of that note ( see 16.50 post).
Silvio Berlusconi, AP
Italian premier Silvio Berlusconi holds a pen over a note he wrote during Democratic party leader Pierluigi Bersani’s speech.
The note reads: “308, -8 traitors; Government upturn; Vote; Take note; Resignation; Italian President; One solution; Let’s move”, prior to the start of the vote.
17.29: And the latest on Italian bond yields:
17.27: And in Brussels, finance ministers wrapped up their meeting. The FT’s Peter Spiegel looks at what the two-day meeting did or didn’t achieve:
European finance ministers ended two days of meetings in Brussels agreeing they need to move quickly to erect new firewalls to prevent the turmoil in Greece from further infecting Italy. But they also acknowledged those new firewalls are unlikely to be in place for at least another month.
Once again, financial markets themselves may prove too fast for elected European leaders to react.
The purpose of giving the eurozone’s €440bn rescue fund new powers and additional firepower was to give it the authority and wherewithal to intervene in the Italian debt market. That would help lower borrowing costs for a country that most analysts agree is solvent but is struggling to raise cash at reasonable rates.
Yet even though the new powers for the European Financial Stability Facility were agreed in July, it took months to get national parliaments to ratify them. Similarly, it will take several weeks to get leverage arrangements in place so the EFSF can make ripples in a Italian bond market worth €1,900bn.
Asked why the EFSF has not moved already to purchase Italian 10-year bonds, which every day grow closer to 7 per cent borrowing rates, Klaus Regling, the EFSF chief, said: “Let’s see what happens in December.”
17.12 The latest from Italy’s Ansa newswire is that prime minister Silvio Berlusconi will consult tonight with President Giorgio Napolitano but won’t resign. The newswire cited unidentified officials close to the premier.
17.04: With Berlusconi off to see the president, this seems an opportune moment to remind ourselves of the key moments of his career – the triumphs, the defeats, the scandals, the women, the legal wrangles, the model cathedrals. It’s all on this FT timeline.
16.50: In Rome, smoke is rising from FT correspondent Guy Dinmore’s keyboard as he tracks the twists and turns of what is turning into a feverish afternoon’s politics, even by Italian standards.
Berlusconi is due to meet Giorgio Napolitano, head of state, in just over an hour. Napolitano, 86, the most respected political figure in Italy according to opinion polls, is expected to suggest that the prime minister step down in the national interest. However, the president at this point can only exert “moral suasion” and would not be in the position to oblige Berlusconi to leave office. Should the prime minister insist he will fight on then the next step is likely to be a parliamentary vote of confidence in the government, possibly on Thursday.
Meanwhile an eagle-eyed photographer is said by reporters to have snapped a picture of a note written by Berlusconi in parliament which said “308 minus 8″ (indicating the number of defectors he lost) followed by “find a solution. Go to Napolitano”.
No one seems to know what that solution is at the moment, or at least they are not saying.
16.46: Italy looks like a one-way bet for global markets, argues Lombard Street Research’s Dario Perkins in this note.
Italy is too big to save, at least using the Europeans’ current approach to the crisis.
Only full fiscal integration or unlimited bond purchases would be enough. So a bet against Italy is a bet against these outcomes, both of which are politically unacceptable in Germany. Then there is Italy’s poor economic outlook [see 12.32 - Ed]. Italy typically doesn’t grow much more than 1 per cent annually, even when the global economy is performing well and the government isn’t tightening fiscal policy. With external demand slowing (especially in the rest of the euro area), European ‘austerity’ can only compound these problems. And with the Italian government perpetually on the brink of collapse, it seems unlikely push through the structural reforms the economy needs.
16.40: More market reactions to the Italian vote, courtesy of Reuters.
Thomas Simons, money market economist, Jefferies&Co, New York:
“The Treasury market likes it. Since Berlusconi has no majority, there’s a feeling he could resign which could be a risk-off event. The market seems a bit confused about what to do with this.”
Marc Chandler, global head of currency strategy at Brown Brothers Harriman:
“Basically this is the worst possible combination of events — he wins the vote but doesn’t get the majority.
“This is euro negative because it increases near-term uncertainty … it keeps uncertainty hanging over the market.”
16.34: Remember Greece? Kerin Hope of the FT has the latest.
A cheerful-looking George Papandreou was spotted this afternoon at an outdoor cafe in the national gardens – a belt of green that separates his office in the parliament from the Megaro Maximo, the government’s official base. He was chatting with a smartly dressed man in a dark suit whom none of the Greek reporters – who kept a respectful distance – were able to identify.
Was he getting some last-minute advice on the composition of the new cabinet? Or simply waiting for his ministers to send in their resignations in writing?
According to the next stage of the procedure, once the cabinet is agreed, President Carolos Papoulias will call a meeting of all political party leaders (though nobody expects the leftwing party bosses to show up). They will approve the formation of the coalition government and the names will be announced.
It’s 99 per cent certain that Lucas Papademos, a former ECB vice-president, will get the premier’s job, though, as one conservative put it: “Nothing’s agreed till everything’s agreed,” meaning the cabinet line-up has to be fully in place.
There are still a couple of sticking points: the conservatives want to dump Panos Beglitis, the defence minister and a close ally of Papandreou. And while Papademos seems to have won his battle to sack Evangelos Venizelos, the finance minister, it’s not clear who will replace him.
Tassos Yannitsis, a former economic adviser to a previous prime minister is one candidate; another is Vassilis Rapanos, chairman of National Bank of Greece and a former chairman of the finance ministry council of economic advisers. Both are mild-mannered economists who would be welcomed at a eurogroup meeting of finance ministers, or any other troika (EU-IMF-ECB) gathering, said one European observer in Athens.
16.11: The euro is poised to depreciate further against the dollar amid increased concern the region’s debt crisis will worsen, says Royal Bank of Scotland’s Robert Sinche. This from Bloomberg:
“There is a persistent pessimism, and the market is very convinced that this will eventually lead to a much weaker euro,” Sinche, 59, global head of currency strategy at RBS Securities Inc. in Stamford, Connecticut, said in a radio interview on “Bloomberg Surveillance”.
“If it goes to a full-fledged bail-out and run on Italy, the resources aren’t there. So they need to put in backstops much earlier than Italy.”
15.54: Italy’s business leaders are digesting the implications of the vote in Rome, writes Rachel Sanderson in Milan:
Corrado Passera, head of Intesa Sanpaolo and one of Italy’s most prominent business leaders, in a conference call with investors, has been called on to respond to the vote in Rome which has seen Silvio Berlusconi losing his majority.
“I am not confident in the way the country is presently managed but I am confident at the way the country will be managed in a short period of time,” he said.
The executive reflects a view widely-held in Italy’s financial and business capital and which has gained momentum in the past 36 hours that Mr Berlusconi will shortly make way for a new government.
15.50: A government minister is quoted as saying Mr Berlusconi is to meet the head of state. But that does not necessarily mean his resignation is imminent, writes the FT’s Guy Dinmore:
Ansa news agency quotes an unnamed source in the chamber as saying Berlusconi told his party leaders after the vote that they should decide their next move immediately.
Berlusconi could present his resignation to Giorgio Napolitano, head of state, who would then open consultations with party leaders to see if there was sufficient support in parliament for a new coalition government – either led by a figure proposed by the prime minister or possibly an outside technocrat, with Mario Monti, former European commissioner, most mentioned as a possible candidate.
However Berlusconi could decide to fight on and with a last roll of the dice call for a vote of confidence in his government on the basis of its reform programme agreed with the EU and ECB.
The prime minister has returned from parliament to his offices. Ignazio La Russa, defence minister, was quoted by reporters as saying that Berlusconi would later meet the head of state. But this does not necessarily mean that he has already decided to resign.
Market pressure is mounting on Berlusconi to step down. The yield gap between Italian and German 10-year bonds jumped after the vote back above 490 points, close to euro-era highs reached in the morning before the ECB stepped in again to buy Italian bonds.
15.44: And Italian yields turn higher, tweets the FT’s Chris Adams.
15.40: And it is not over yet. The Italian prime minister faces another round of talks. But first he wants to know who the rebels are. The FT’s Guy Dinmore reports:
After the vote Berlusconi left the chamber for talks with the Northern League, his junior coalition partners whose leader Umberto Bossi, had earlier said the prime minister should “step aside”
Ansa news agency reports that Berlusconi – who had earlier said he wanted to “see the faces” of those who would “betray” him – joined ministers in checking the list of names of those who had voted on the government side to identify which rebels had joined the opposition. Last month the government survived a vote of confidence with 316 votes, an absolute majority of one.
Bossi had earlier suggested to reporters that Angelino Alfano, secretary of Berlusconi’s People of Liberty party, should be nominated as prime minister. However it remains doubtful that Mr Alfano would be able to muster a viable majority in parliament.
15.36: Drama in Brussels, but this time about the financial transaction tax. The FT’s Alex Barker reports:
George Osborne, AFP
EU finance ministers will be leaving Brussels today with a row over the financial transaction tax ringing in their ears.
George Osborne, UK chancellor, used the ministerial gathering to launch a blistering attack on the Franco-German backed proposal, pleading with his colleagues to stop wasting time on the issue. With cameras transmitting the debate live, Mr Osborne put on quite a show of political theatre, directed primarily at his home audience. He claimed the Commission proposal would destroy half a million jobs in Europe and was nothing more than “a big tax on pensioners”, because “no banks are going to pay”.
But the his most provocative tactic was to unexpectedly call for a vote on the issue, arguing that both advocates and opponents of the measure wanted it to be resolved urgently.
The move was partly to call the bluff of Germany and others warning that they would push ahead with a eurozone tax, should agreement at 27 be impossible. Mr Osborne’s confidence came from some eurozone countries — including Ireland and Italy — voicing misgivings about the plan.
While not delivering one of his most passionate speeches in favour of the tax, Wolfgang Schaüble, German finance minister, made his views about the UK objections quite clear. “That’s just an excuse for doing nothing. We will wait 20 years before doing anything if we wait for the last island on this planet,” he said.
15.29: Just how bad is the Italian bond market crisis? Over to the FT’s Peter Spiegel:
Consider this: Irish 10-year bonds opened today with borrowing rates at 7.74 per cent — or just 100 basis points higher than the highs Italian 10-year reached today. Irish bonds have been the victim of a broader eurozone sell-off as the trading day has progressed, with yields spiking to 8.2 per cent near the close, but it will be interesting to watch if those two lines cross in the days to come. Is it possible that the financial markets now have more faith that Dublin, which is in the midst of a three-year EU-IMF bail-out, will meet its debt commitments than Rome?
15.26: The results are in. What now for Mr Berlusconi? The FT’s Guy Dinmore reports:
Silvio Berlusconi’s centre-right government has clearly lost its majority in parliament in a key vote on the 2010 accounts. The ruling coalition mustered 308 votes to pass the motion but was eight votes short of having an absolute majority in the lower house. Opposition MPs did not cast their votes.
Pierluigi Bersani, leader of the main opposition Democratic party, urged Mr Berlusconi to resign, warning that Italy risked losing access to the financial markets.
The prime minister had been reported as saying earlier that he would consider his next move after the vote.
15.19: BREAKING NEWS Berlusconi wins vote in Italian parliament
The number of abstentions suggests the Italian PM has lost his majority.
308 members of the 630-seat house voted in favour of the motion – short of the 316 needed for an absolute majority.
15.10: We’re less than an hour away from the rescheduled vote in the Italian parliament on the 2010 accounts. Could it be that, as his earthly majority ebbs away, Berlusconi is appealing to a higher power?
15.06: Italian politics has cast a shadow on stocks worldwide, which are slightly higher on the day, writes Jamie Chisholm, global markets commentator.
Wall Street’s S&P 500 has started Tuesday’s session with a gain of 0.5 per cent and the FTSE Eurofirst 300 is up 1.7 per cent, helping the FTSE All-World index to add 0.7 per cent despite a weak Asian session. Growth-focused assets are mostly firmer, with Brent crude up 1.6 per cent to $116.40 a barrel and copper higher by 1.2 per cent to $3.58 a pound. Perceived havens such as US Treasuries and Bunds are seeing waning demand, pushing yields higher by a couple of basis points.
Read the updated markets report
Worries about rising tensions between Israel and Iran have helped to push up that oil price.
14.57: Italian media are reporting that the crucial vote on the 2010 accounts has been pushed back to 5pm local time, 4pm GMT.
14.50: Suggestions are pouring in to our comments section – well, one has poured in, at least – for how best to name the crisis. Except that it’s the reporter’s byline, rather than the headline, that needs rethinking, apparently. So opines Muffinavenger, someone who clearly pays close attention to finding the right moniker.
Hope is a completely inappropriate name for a correspondent from Athens [see posts passim]. How about Kerin Doom, Kerin Default, or Kerin Utter Catastrophe?
14.24: Over in Milan, Corrado Passera, chief executive Intesa Sanpaolo, Italy’s biggest retail bank which holds €60bn in Italian sovereign debt, the largest holding of any Italian institution, has commented on the crisis gripping Italy.
The pressure in the marketplace on Italian government bonds has grown in recent weeks and months, and the spreads reached are certainly a cause for concern.
However, we remain convinced that our country will meet all its obligations and progressively reduce its overall indebtedness. Few countries in Europe have, like us, already obtained a primary surplus, and the prospect of a balanced budget which has been subject to laws already passed in parliament.
I would like to add that while the immediate outlook is uncertain, the fundamental strengths of the Italian economy are confirmed. There is low family and business indebtedness, a strong and vibrant manufacturing sector with growing exports, no real estate bubble and very high private and public assets.
Italy will rebuild its credibility on the basis of a balanced combination of austerity and development that will reduce total debt and create sustainable development and jobs. We have to send a clear message of our commitment to our European partners.”
14.17: Meanwhile, London is abuzz as word spreads that a celebrated Italian forged in the murky world of Milanese power politics is making an exhibition of himself…
14.14: Over to Athens, where the FT’s Kerin Hope has the latest:
George Papandreou asked his cabinet to resign on Tuesday, opening the way for the appointment of a new Greek government that is likely to be headed by Lucas Papademos, a former vice president of the European Central Bank.
Full report coming soon on FT.com
14.04: So many angles, so little time. Efforts are under way across Europe (and in the FT’s newsroom) to encapsulate all that is going on in pithy, perhaps even vaguely amusing, style. The Miltonic Papandemonium is an early leader, with many in the blogosphere going with Europocalypse. Something along the lines of Beware of Greeks Bearing Gilts seems promising… The comments section below awaits your offerings. We are even considering a small prize for the best – probably denominated in drachma.
13.39: Italy’s bond market is fast approaching a crisis point as the country’s politicians fight for stability. David Oakley, capital markets correspondent, talks to John Wraith, fixed income strategist at Bank of America Merrill Lynch, about where the markets are heading and what is needed to calm them.
13.33: And now Nouriel Roubini, Dr Doom himself, weighs in on the Italian leadership crisis on Twitter:
13.27: Italian bonds have traded over 450 bps relative to Bunds for the second consecutive day. This raises fears that its spread to a benchmark AAA index will also pass this mark, triggering a clearinghouse margin call. FT Alphaville just spoke to Luca Mezzomo, macroeconomist at Intesa Sanpaolo Group, to discuss ‘cliff risk‘ in Italian bonds.
13.12: Bulls are still on the front foot, writes the FT’s Jamie Chisholm, but still wary of the political situation in Italy:
The FTSE Eurofirst 300 is up 1.5 per cent, helping the FTSE All-World index to add 0.3 per cent despite a weak Asian session. Growth-focused assets are mostly firmer, with Brent crude up 0.9 per cent to $115.61 a barrel and copper higher by 0.3 per cent to $3.55 a pound. Perceived havens such as US Treasuries and Bunds are seeing waning demand, pushing yields higher by a couple of basis points.
S&P 500 futures suggest Wall Street will start Tuesday’s session with a gain of 0.4 per cent. Currencies are stable, with the dollar index down 0.1 per cent and the euro flat at $1.3772.
13.06: BREAKING NEWS from Athens. Kerin Hope reports that the members of Greece’s cabinet are due to hand over resignation letters in a couple of hours.
12.59: Back to Athens, where there are signs that the wheels are turning in efforts to form some sort of post-Papandreou government. Meanwhile, the FT’s Kerin Hope has more on the power games beneath the public political manoevres (see 10.32).
So who’s afraid of a dozen or so Greek oligarchs – several big contractors grown fat on European Union structural funds, a few bankers and a handful of shipowners with onshore business interests?
George Papandreou, sadly.
One reason is because the oligarchs control much of the Greek media which, not surprisingly, has grown steadily more critical of his socialist government as the country marches on towards what could be a messy default.
In spite of plunging advertising revenues at private television stations, and miserable circulation figures for print outlets, the media are still chattering away.
Their collective exposure to the country’s cash-strapped local lenders reportedly exceeds €1bn. Yet the bankers don’t seem bothered that the oligarchs’ loans aren’t being serviced. That’s because some oligarchs are also big shareholders in some banks.
Papandreou claimed to have addressed this problem, according to the transcript of his farewell speech to parliament as premier last Friday.
“We dared to speak about the non-transparent financing of excessively debt-burdened media by our banks, using non-banking criteria,” the prime minister said, rounding off a self-congratulatory list of his achievements during two years in office.
Even loyal socialist supporters have been wondering why, since Papandreou and his government knew all about the media scam, they didn’t take action.
12.52: For anyone seeking more analysis on the ruckus in Rome, Open Europe, a think tank, has put a research note, suggesting, among other things, that Italy’s heightened interest payments could potentially wipe out almost half of its projected €60bn budget savings by 2014.
12.41: Our FT colleagues in Hong Kong are reporting that the shockwaves from the eurozone are lapping on Asian shores.
Stuart Gulliver, AFP
Stuart Gulliver, chief executive of HSBC, warned on Tuesday that Asia is facing the threat of a potential slowdown in the flow of credit to the region, especially from beleaguered European banks.
12.32: Reuters has crunched some data and produced a forecast chart for the Italian economy. It’s all downhill from here…
12.27: We are as ever very keen to read your views in the comments section at the foot of this post. AmericanInvestor, rapidly becoming a stalwart of the FT’s live eurozone blogs, muses:
Just months ago, Europe cheered rebellion in the streets of Cairo and Alexandria. And, just weeks ago, Europe sent armed forces to Libya to support rebellion. Yet, today Europe cheers when a technocratic Prime Minister, whom no one elected, is imposed by Greece’s elites on the People of Greece.
12.14: Over in Brussels, European finance ministers are chewing over, among other things, the mooted “Robin Hood tax” on financial transactions. It seems there is some dissension in the ranks, notably with the UK finance minister, no fan of the tax idea, according to this tweet from the European Council’s press office.
12.07: Berlusconi has, of course, delayed the release of his latest collection of love songs, reportedly because the woes of the Italian economy are proving something of a passion killer. This afternoon we might to discover whether the euphonious premier is to be accompanied by a fat lady…
Should anyone need reminding of his talents, here is one of his greatest hits:
12.03: Still in Rome, Umberto Bossi (see 11.57) adds, according to Ansa news agency: “Nothing will happen today.”
11.57: BREAKING NEWS from Rome: Umberto Bossi, Umberto Bossi, leader of the Northern League, junior partners in the ruling coalition, told reporters his party was asking Berlusconi to step aside.
The FT’s Guy Dinmore in Rome reports:
Asked whether the prime minister should be replaced by Angelino Alfano, secretary of Berlusconi’s People of Liberty party, Bossi was quoted as replying: ‘Who else would we put? The leader of the PD (opposition Democrats)?’
Bossi has previously insisted that his party wanted early elections if the government were to fall. It was not immediately clear if the Northern League’s latest stance was a ploy to persuade wavering MPs to vote with the coalition later today, or its final position. For sure, however, Bossi’s comments will fuel speculation that Berlusconi does not have long left in office.
11.42: Now the head of Italy’s employers’ association Emma Marcegaglia warns of the dangers to Italy of a widening bond spread with Germany. This from Reuters:
“Italy has serious difficulties with a spread of 500 basis points. We can’t go forward for a long time like this,” Marcegaglia said in a speech.
Italy has the third-biggest economy in the euro zone and its debt worries are a huge threat in the wider crisis facing the continent’s single currency.
Marcegaglia said if the problem was not resolved quickly it would mean a credit crunch. “On the financial market that means our banking system finds it harder to operate. It’s absolutely fundamental politicians do their job,” she said.
The spread between 10-year Italian BTP bonds and German Bunds stood at 481 basis points on Tuesday.
11.37: Why exactly are equities markets apparently in chipper mood when Greek and Italian politicians seem to be guiding the euro towards the abyss? Over on FT Alphaville, Neil Hume and Bryce Elder are trying to make sense of it all in Markets Live.
11.34: A shuffle, a sidestep, a departure? All options are on the table as pressure mounts on Mr Berlusconi ahead of this afternoon’s vote. The FT’s Guy Dinmore reports:
Berlusconi is in last-ditch talks with some of his party’s rebels ahead of this afternoon’s vote on the 2010 accounts which will demonstrate whether the government has the numbers to continue.
Isabella Bertolini, one of the dissidents who called on the prime minister to step down, told reporters after their meeting that he was considering all possibilities – “staying, going, a sidestep…”
Meanwhile opposition leaders have said their MPs will be present in the chamber for the motion but will not vote. Five members of Mr Berlusconi’s People of Liberty party are also reported to have said they will not vote.
This would virtually guarantee that the ruling coalition will fail to reach an absolute majority in the 630-member lower house, and could even fall short of a simple majority of those present.
Failure to reach a simple majority would pile the pressure on Mr Berlusconi to submit his resignation to the head of state. Voting is due to take place at 3.30 pm ( 2.30pm London time).
11.20: Is Italian debt “beyond the point of no return”? Analysts at Barclays Capital voice their fears about events in Rome and the bond markets:
The ongoing debt crisis in Greece is a legitimate concern for policymakers and investors, but growing concerns about Italy pose the real danger to Europe and the world economy. Yields on Italian government debt have reached new highs, and are at levels that we consider clearly unsustainable.
We believe that policy reforms in Italy are necessary to increase confidence in the Italian credit. However, historical experience suggests that the self-reinforcing negative market dynamics that now threaten Italy are very difficult to break. At this point, Italy may be beyond the point of no return. While reform may be necessary, we doubt that Italian economic reforms alone will be sufficient to rehabilitate the Italian credit and eliminate the possibility of a debilitating confidence crisis that could overwhelm the positive effects of a reform agenda, however well conceived and implemented.
While it is a step in the right direction, we believe that the EFSF [Europe’s rescue fund] is not an adequate safety net to insulate countries like Italy from contagion, and short-circuit ‘vicious circle’ market dynamics that could overwhelm countries’ efforts to adjust and reform. Foreign governments and the IMF could provide cash but not credit. We see little practical alternative to a strengthened commitment by the ECB to act as lender of last resort to precariously positioned eurozone governments.
11.12: As George Papandreou prepares for what will likely be his last cabinet meeting, Greek politicians on all sides are considering the merits of the two leading candidates to replace him. The FT’s Kerin Hope reports from Athens:
George Papandreou is still, just, the Greek prime minister. And he’s holding what should by all accounts be his last cabinet meeting at midday today.
Top of the agenda? Whether Lucas Papademos or Takis Roumeliotis – two very different kinds of economist – should become his successor.
One reason that Papademos hasn’t been a shoo-in is the growing influence of “old” Pasok, – socialist party hardliners – as Papandreou moves out of office and perhaps out of the party leadership, too.
They don’t care for Papademos, seen as an ally of the party’s modernising faction (the optimistic people who took Greece into the euro) when he served as Greece’s central bank governor back in the late 1990s.
The hardliners would prefer Roumeliotis, who owed his appointment as finance minister to Andreas Papandreou, father of George and the man responsible for Greece’s first round of reckless borrowing in the 1980s.
Meanwhile in the conservative camp, opposition leader Antonis Samaras is still gunning for Papademos to get the job. He wouldn’t mind calling back some pro-European socialist modernisers, it seems.
They could be useful allies as Greece tries to rebuild bridges with Brussels once the new government is in place.
11.02: The latest on the vote in Rome from the FT’s Guy Dinmore. It is an instant vote – where deputies hit their buttons – not roll-call so results should be out just after 2.30pm in London.
10.59: And what would an Italian government headed by Mario Monti look like? The FT’s Peter Spiegel ruminates:
The man most frequently mentioned as the likely head of a technocratic Italian government, Mario Monti, is no stranger to Brussels, having served as the European Commission’s powerful competition chief during the bruising Microsoft antitrust investigation in the early-2000s and, more recently authoring the so-called “Monti Report” on the future of the EU’s single market.
He is also a regular on the Brussels think-tank circuit where he likes to joke that he is the most German of Italian economists. In recent appearances, however, he has made flattering comments about the US Congress’s recently-conceived “Super Committee”, where leading Republicans and Democrats have been thrown together to come up with a slate of new austerity measures, which then must be approved by Congress on an up-or-down vote – a structure that Monti believes allows them to balance the “net political cost” to either party, insulating both sides from political retribution on election day.
At a conference last month hosted by the Bureau of European Policy Advisers, the European Commission’s internal think-tank, Monti talked at length about how the only way to get progress on many of the economic reforms European governments now need is for political parties to do the same thing as their American counterparts, sharing the political pain – a centre-left party, for instance, agreeing to cut pensions as long as the centre-right party agrees to raise taxes on the wealthy. A recipe for a new Monti government? See 1:03:45 in this video.
10.53: Silvio Berlusconi has been quoted as saying that he would decide whether to resign after this afternoon’s vote in the lower house on ratifying the 2010 accounts. ( See blog posts from 9.20, 9.57 and 10.10). In his latest report, the FT’s Guy Dinmore outlines what could happen if Mr Berlusconi does resign on Tuesday.
Should Mr Berlusconi present his resignation on Tuesday evening then Giorgio Napolitano, head of state, will hold consultations with political leaders to see if an alternative government can put together a majority in parliament.
Two possible scenarios are a broader centre-right coalition led by a Berlusconi appointee, possibly cabinet undersecretary Gianni Letta, or an emergency technical government headed by Mario Monti, former European Commissioner. Senior officials say that as matters stand it would appear that neither would have broad enough parliamentary support to form a viable government.
This would plunge Italy into the uncertainty of snap elections in January, and further delays in implementing the deficit-cutting and growth-promoting measures demanded by the EU and ECB.
10.45: The people of Greece must have their say about whether to stay in the euro, cry David Cameron’s Tories. But, argues Philip Stephens, the sceptics’ attachment to plebiscites is replete with contradictions.
If the people deserve a say on Europe, why not on the government’s austerity programme?
Be careful of what you wish for, he warns the sceptics, concluding:
Pro-Europeans should take heed on the question of sovereignty. It is shared in Europe, but shared to Britain’s national advantage. Interdependence is the organising fact of today’s world. The complete freedom of action outside Europe sought by the sceptics is nothing more than a mirage. They seek the sovereignty of the man wandering alone in the desert – absolute but worthless.
10.37: Greek T-bill yields are edging higher, tweets the FT’s markets editor Chris Adams.
10.32: There is a darker side to the Greek crisis, the crime and corruption which Misha Glenny expounds on in his commentary on the country’s rapacious oligarchs.
As the new Greek government struggles to convince Europe of its resolve to cut the country’s bloated public sector, it also has to decide whether to face down the real domestic threat to Greece’s stability: the network of oligarch families who control large parts of the Greek business, the financial sector, the media and, indeed, politicians.
For these oligarchs, who have sought to undermine Mr Papandreou at every turn, the crisis presents an opportunity.
Their aim is clear – they are waiting to pounce on the state assets which, under the various bail-out plans, the Greek government must privatise. With the domestic economy in free fall, the share price of these hugely valuable entities such as the electric grid and the national lottery has been collapsing steadily over the past two years.
10.10: In Rome, parliamentary voting starts at 2.30. It is not yet clear if it’s an instant vote where deputies hit their buttons or whether by roll-call which could take over half an hour.
10.05: European Union finance ministers are meeting again this morning in Brussels, although unlike last night, it’s all 27 countries participating, not just the 17 members of the single currency, writes Peter Spiegel, the FT’s Brussels bureau chief. As a result, their agenda is a little off the news, dealing with a long list of somewhat esoteric financial regulation issues.
Last night’s eurozone finance ministers meeting did not produce much in terms of final decisions, other than to insist that both major parties in Greece must make a written commitment to strictures in the new €130bn bail-out plan before a much-needed €8bn aid payment will be released.
However, officials at the European Financial Stability Facility, the eurozone’s €440bn rescue fund, did pass out a more detailed summary of what their new leveraging plan, which they hope will increase its firepower to about €1,000bn. The most noteworthy change appears to be the decision to change the name of a special new fund intended to attract outside investors into buying Italian bonds from a Special Purpose Investment Vehicle (SPIV) to a Co-Investment Fund (CIF).
9.57: How belligerent is Berlusconi feeling today? Is he up for a fight or preparing to go quietly?
A glance at the front page of Il Giornale, a Milan daily owned by the Berlusconi family, speaks volumes. The FT’s Guy Dinmore says.
It’s leading its front page with the headline: “Berlusconi resists: I am not going.” and quotes the prime minister as challenging the “Judases” of his party: “If you want to vote against me in parliament, I want to look in the face of those who will betray me.”
9.45: Gideon Rachman, the FT’s chief foreign affairs commentator, has written a trenchant piece arguing that saving the euro is the wrong goal. Gideon concludes:
Some argue the destruction of the single currency will destroy the EU itself. But such alarmism risks becoming a self-fulfilling prophecy. Key European achievements such as the single market, border-free travel and co-operation on foreign policy preceded the single currency and they can survive its demise. Rather than insisting that the break-up of the euro is unthinkable, Europe’s leaders need to start planning for it.
9.40: As for the rest of the global markets, they’re on the “front foot”, according to Jamie Chisholm, the FT’s global markets commentator, “with traders cheered by a stoic performance on Wall Street overnight but still cautious about the political situation in Italy”.
The FTSE Eurofirst 300 is up 0.4 per cent, helping the FTSE All-World index to restrict its losses to 0.1 per cent following a weak Asian session.
9.28: Meanwhile, a few hundred miles down the Mediterranean, in Greece, Athens is abuzz with speculation over who will finally be picked as temporary prime minister, reports the FT’s Kerin Hope.
The frontrunner, Lucas Papademos, appears to have fallen out of favour after he set conditions for the job: that no specific date would be set for elections (that would make him a complete lame duck) and that he should be able to pick a few key colleagues, maybe even a replacement for finance minister Evangelos Venizelos.
Nikiforos Diamandouros, the European Union ombudsman and the second favourite, has one disadvantage – he’s not an economist, though he worked successfully with politicians as Greece’s own ombudsman.
Coming up on the outside is Takis Roumeliotis, Greece’s IMF representative, and a former finance minister who oversaw the country’s balance-of-payments crisis at the end of 1980s – when Greece narrowly managed to avoid a European Union bail-out but was threatened (by Jacques Delors, then Commission president) with expulsion from the-then European Community.
At least he’s got hands-on some experience of a crisis.
Place your bets…
9.23: David Oakley, on the FT’s markets desk, says that bond trading volumes are very light this morning, ahead of the Italian parliamentary vote, which is due mid-to-late afternoon.
9.20: Guy Dinmore, the FT’s Rome correspondent, reports that bond markets are piling the pressure on Silvio Berlusconi to resolve the political deadlock today, sending yields on Italy’s 10-year bonds to fresh euro-era highs and close to the point where analysts say debt cots risk spiralling out of control.
The prime minister was quoted as saying after a meeting of party leaders last night that he would decide whether to resign after this afternoon’s vote in the lower house on ratifying the 2010 accounts.
The centre-right government is expected to survive the vote but may not reach an absolute majority that would allow it to press on with reforms pledged to the EU last month. Opposition parties are likely to measure their strength in parliament by abstaining before deciding whether to call later in the week for a vote of no confidence in the government. Mr Berlusconi is preparing this morning to meet several dissidents in his party in a last-ditch effort to avert what he calls “betrayal”.
Yields hit a high of 6.74 per cent this morning before easing slightly, possibly on further intervention by the European Central Bank. The spread with German bunds widened to a euro-era high of 496 points before narrowing to 486.
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